Backlog of property-tax appeals may cost Hackensack $30M

By CHRISTOPHER MAAG

staff writer |

The Record

A backlog of hundreds of tax appeals – some dating back nearly a decade — could cost Hackensack as much as $30 million, forcing the city to borrow the money instead of investing in infrastructure improvements, officials acknowledged this week.

City leaders blame the backlog on shoddy record keeping by the previous administration.

“It wasn’t even organized chaos. It was just chaos,” said Anthony Rottino, the interim city manager, describing Hackensack’s old system of property tax records. “This is going to have a dramatic impact on the city’s budget and its bond rating.”

At least $10 million is owed this year, officials said, but the total could be triple that number once all the cases are resolved.

Allies of the previous regime dispute the allegations, and they say the $30 million figure is too high to be believed.

“When anything goes well, they say it’s because of this current council, and when something is not going well, they blame the other guys,” said Jason Nunnermacker, a member of the school board who ran unsuccessfully for City Council last year. “To me, it’s poor leadership.”

The large number of unresolved tax appeals puts Hackensack in the same league as Paterson and Newark, both of which have been inundated in recent years, tax appeal experts said.

“That’s a lot of appeals for a city that size,” said John Lloyd, a tax appeal attorney who represents a number of property owners in Hackensack, including North Jersey Media Group, which publishes The Record and is seeking a reduction in the valuation of its 19.7-acre property near downtown Hackensack.

“Ten million dollars, for a town of that size? That’s extraordinary,” said Paul T. Fader, a lawyer, former Englewood mayor and a current member of the Bergen County Board of Taxation. “If I lived in Hackensack, I’d have concern.”

The damage will hit in waves. The city must make an emergency payment of $1.37 million by July 1 to the owners of a single property, 3 University Plaza, a six-story office building. Then a payment of about $8.7 million must by made by the end of 2014 on other tax appeals that went against the city, said Thom Ammirato, the city spokesman.

An additional 569 cases filed years ago remain in various stages of the tax appeal process; some may not be resolved for years, Rottino said. In addition to the backlog, the city received 250 new tax appeals in April, Rottino said. Those appeals have yet to be heard, so the city’s total debt may grow even higher.

One case involves The Shops at Riverside, the north-end mall owned by the Indianapolis-based Simon Property Group. The company claims it is owed nearly $16 million for years of overpaid property taxes, Rottino said.

Les Morris, a spokesman for the company, declined to comment.

A taxpayer whose property is valued at less than $1 million can file an appeal with the county tax board, but if unhappy with the result, the owner may appeal to state tax court. A person with a property valued at more than $1 million appeals directly to state tax court. The state tax court in most cases approves settlements negotiated between municipalities and property owners, experts said.

Costly borrowing

The city will borrow money by issuing bonds to pay what it owes property owners, Rottino said. That could hurt its credit rating, making it more expensive for the city to borrow money in the future. The city may renegotiate settlements it already has made in an effort to reduce its debt, or spread payments over multiple years by offering property tax credits instead of cash payments, he said.

The city has an operating budget of nearly $100 million. Next year, the city will begin paying about $2 million a year from its operating budget to repay the $10 million on cases that are already settled, not including interest or debt on cases yet to be decided, Ammirato said. The financial hit will set back plans for city infrastructure improvement, just as Hackensack prepares for what leaders hope will be a big wave of redevelopment, officials say.

“Our roads look like a Third World country. Our streets flood. We need more recreational opportunities. Those are the things you want to issue bonds for,” said Ammirato. “Borrowing this money for tax appeals limits the amount you can borrow for capital improvements, which is really what the city needs.”

Municipalities across New Jersey and around the country faced similar problems after the 2008 mortgage crisis. Paterson issued $8 million in bonds over the last three years to cover tax appeal costs. Paramus borrowed $1.8 million in 2011. In 2013, the Bergen County Board of Taxation handled more than 12,000 tax appeals, a board official said. This year, the board received at least 10,000 appeals, the official said.

Since the mortgage crisis, there have been 4.4 million foreclosures nationwide, according to CoreLogic, a property consulting firm. The value of homes surrounding foreclosed properties has dropped by $1.95 trillion, and the crisis drained $7 trillion from the equity Americans had invested in their homes, according to the Center for Responsible Lending. As the value of homes and other properties dropped, property owners appealed their property valuations.

“Over the last five years there’s been an extraordinary amount of tax appeals, much more than in the past,” Fader said. “That’s had an extraordinary impact on all the municipalities across the state.”

Unlike Hackensack, however, most cities already faced the financial pain and have begun to recover, said Ed Purcell, an attorney for the New Jersey League of Municipalities.

“The tax appeal thing is actually pretty common,” Purcell said. “It was most common a few years ago during the depth of the recession and the bottom of the real estate market.”

Hackensack’s troubles include aging retail and condominium buildings that experienced pronounced drops in property values after the 2008 slump, plus a tax rate of $3.217 per $100 in assessed value — among the highest in Bergen County — which makes it even more expensive for the city when it loses a tax appeal.

The total value of all the properties in Hackensack dropped $1 billion between 2010 and 2014, Ammirato said, bringing the city’s current property tax base to $4.9 billion.

“I think Hackensack got hit by a perfect storm,” Lloyd said.

The huge number of costly tax appeals came as a surprise to the city government that took over a year ago. Hackensack’s previous leaders either ignored the growing backlog, lost paperwork or never created documentation in the first place, said Rottino, Ammirato and Deputy Mayor Kathy Canestrino. The city’s tax attorney settled cases worth millions of dollars, Ammirato said, but the City Council never voted to appropriate the money.

‘Amazing’ discovery

When the current administration took over, Ammirato said, they found piles of manila envelopes stuffed with notes and random scraps of paper concerning property tax appeals. In many cases, it was impossible to tell what had happened.

“It was amazing to us. We’re looking at property tax bills that haven’t been settled since 2006,” said Canestrino, a member of the current council.

None of the five former City Council members returned calls seeking comment. Supporters of Hackensack’s former leaders question the cause and the size of the problem.

“Thirty million dollars? That’s from some other planet,” said Rick Salkin, the attorney for the city’s school district and an ally of the Zisa family, which controlled Hackensack for most of the last three decades.

Just a handful of commercial property tax appeals may cost the city lots of money. Sears owns a large building downtown. The retailer started its tax appeal in 2007-08 and won, Ammirato said, dropping the valuation of the main building from $14.7 million to $9.7 million. Hackensack owes Sears $1 million in back taxes.

Regent Care Center, a nursing facility with 180 beds on Polifly Road, also appealed successfully, dropping the value of its property from $19.8 million to $15.9 million. The city owes Regent $378,000, Ammirato said.

Other major tax appeals remain unsettled.

North Jersey Media Group has appealed its tax bill on its River Street property, which is valued at $23.44 million, according to the state taxation division. There’s also 210/214 Main St. and 210 Moore St., a string of properties that include the former 10-story Bank of America building. The owners appealed their tax bills “five or six years ago,” Ammirato said, and the potential reassessment could cost the city hundreds of thousands.

Even getting back to zero will cost the city money. Hackensack now has three lawyers working to organize the old files and clear the backlog, Rottino said, at a cost of $150,000 to $200,000 this year.

Backlog of property-tax appeals may cost Hackensack $30M

By CHRISTOPHER MAAG

staff writer |

The Record

A backlog of hundreds of tax appeals – some dating back nearly a decade — could cost Hackensack as much as $30 million, forcing the city to borrow the money instead of investing in infrastructure improvements, officials acknowledged this week.

City leaders blame the backlog on shoddy record keeping by the previous administration.

“It wasn’t even organized chaos. It was just chaos,” said Anthony Rottino, the interim city manager, describing Hackensack’s old system of property tax records. “This is going to have a dramatic impact on the city’s budget and its bond rating.”

At least $10 million is owed this year, officials said, but the total could be triple that number once all the cases are resolved.

Allies of the previous regime dispute the allegations, and they say the $30 million figure is too high to be believed.

“When anything goes well, they say it’s because of this current council, and when something is not going well, they blame the other guys,” said Jason Nunnermacker, a member of the school board who ran unsuccessfully for City Council last year. “To me, it’s poor leadership.”

The large number of unresolved tax appeals puts Hackensack in the same league as Paterson and Newark, both of which have been inundated in recent years, tax appeal experts said.

“That’s a lot of appeals for a city that size,” said John Lloyd, a tax appeal attorney who represents a number of property owners in Hackensack, including North Jersey Media Group, which publishes The Record and is seeking a reduction in the valuation of its 19.7-acre property near downtown Hackensack.

“Ten million dollars, for a town of that size? That’s extraordinary,” said Paul T. Fader, a lawyer, former Englewood mayor and a current member of the Bergen County Board of Taxation. “If I lived in Hackensack, I’d have concern.”

The damage will hit in waves. The city must make an emergency payment of $1.37 million by July 1 to the owners of a single property, 3 University Plaza, a six-story office building. Then a payment of about $8.7 million must by made by the end of 2014 on other tax appeals that went against the city, said Thom Ammirato, the city spokesman.

An additional 569 cases filed years ago remain in various stages of the tax appeal process; some may not be resolved for years, Rottino said. In addition to the backlog, the city received 250 new tax appeals in April, Rottino said. Those appeals have yet to be heard, so the city’s total debt may grow even higher.

One case involves The Shops at Riverside, the north-end mall owned by the Indianapolis-based Simon Property Group. The company claims it is owed nearly $16 million for years of overpaid property taxes, Rottino said.

Les Morris, a spokesman for the company, declined to comment.

A taxpayer whose property is valued at less than $1 million can file an appeal with the county tax board, but if unhappy with the result, the owner may appeal to state tax court. A person with a property valued at more than $1 million appeals directly to state tax court. The state tax court in most cases approves settlements negotiated between municipalities and property owners, experts said.

Costly borrowing

The city will borrow money by issuing bonds to pay what it owes property owners, Rottino said. That could hurt its credit rating, making it more expensive for the city to borrow money in the future. The city may renegotiate settlements it already has made in an effort to reduce its debt, or spread payments over multiple years by offering property tax credits instead of cash payments, he said.

The city has an operating budget of nearly $100 million. Next year, the city will begin paying about $2 million a year from its operating budget to repay the $10 million on cases that are already settled, not including interest or debt on cases yet to be decided, Ammirato said. The financial hit will set back plans for city infrastructure improvement, just as Hackensack prepares for what leaders hope will be a big wave of redevelopment, officials say.

“Our roads look like a Third World country. Our streets flood. We need more recreational opportunities. Those are the things you want to issue bonds for,” said Ammirato. “Borrowing this money for tax appeals limits the amount you can borrow for capital improvements, which is really what the city needs.”

Municipalities across New Jersey and around the country faced similar problems after the 2008 mortgage crisis. Paterson issued $8 million in bonds over the last three years to cover tax appeal costs. Paramus borrowed $1.8 million in 2011. In 2013, the Bergen County Board of Taxation handled more than 12,000 tax appeals, a board official said. This year, the board received at least 10,000 appeals, the official said.

Since the mortgage crisis, there have been 4.4 million foreclosures nationwide, according to CoreLogic, a property consulting firm. The value of homes surrounding foreclosed properties has dropped by $1.95 trillion, and the crisis drained $7 trillion from the equity Americans had invested in their homes, according to the Center for Responsible Lending. As the value of homes and other properties dropped, property owners appealed their property valuations.

“Over the last five years there’s been an extraordinary amount of tax appeals, much more than in the past,” Fader said. “That’s had an extraordinary impact on all the municipalities across the state.”

Unlike Hackensack, however, most cities already faced the financial pain and have begun to recover, said Ed Purcell, an attorney for the New Jersey League of Municipalities.

“The tax appeal thing is actually pretty common,” Purcell said. “It was most common a few years ago during the depth of the recession and the bottom of the real estate market.”

Hackensack’s troubles include aging retail and condominium buildings that experienced pronounced drops in property values after the 2008 slump, plus a tax rate of $3.217 per $100 in assessed value — among the highest in Bergen County — which makes it even more expensive for the city when it loses a tax appeal.

The total value of all the properties in Hackensack dropped $1 billion between 2010 and 2014, Ammirato said, bringing the city’s current property tax base to $4.9 billion.

“I think Hackensack got hit by a perfect storm,” Lloyd said.

The huge number of costly tax appeals came as a surprise to the city government that took over a year ago. Hackensack’s previous leaders either ignored the growing backlog, lost paperwork or never created documentation in the first place, said Rottino, Ammirato and Deputy Mayor Kathy Canestrino. The city’s tax attorney settled cases worth millions of dollars, Ammirato said, but the City Council never voted to appropriate the money.

‘Amazing’ discovery

When the current administration took over, Ammirato said, they found piles of manila envelopes stuffed with notes and random scraps of paper concerning property tax appeals. In many cases, it was impossible to tell what had happened.

“It was amazing to us. We’re looking at property tax bills that haven’t been settled since 2006,” said Canestrino, a member of the current council.

None of the five former City Council members returned calls seeking comment. Supporters of Hackensack’s former leaders question the cause and the size of the problem.

“Thirty million dollars? That’s from some other planet,” said Rick Salkin, the attorney for the city’s school district and an ally of the Zisa family, which controlled Hackensack for most of the last three decades.

Just a handful of commercial property tax appeals may cost the city lots of money. Sears owns a large building downtown. The retailer started its tax appeal in 2007-08 and won, Ammirato said, dropping the valuation of the main building from $14.7 million to $9.7 million. Hackensack owes Sears $1 million in back taxes.

Regent Care Center, a nursing facility with 180 beds on Polifly Road, also appealed successfully, dropping the value of its property from $19.8 million to $15.9 million. The city owes Regent $378,000, Ammirato said.

Other major tax appeals remain unsettled.

North Jersey Media Group has appealed its tax bill on its River Street property, which is valued at $23.44 million, according to the state taxation division. There’s also 210/214 Main St. and 210 Moore St., a string of properties that include the former 10-story Bank of America building. The owners appealed their tax bills “five or six years ago,” Ammirato said, and the potential reassessment could cost the city hundreds of thousands.

Even getting back to zero will cost the city money. Hackensack now has three lawyers working to organize the old files and clear the backlog, Rottino said, at a cost of $150,000 to $200,000 this year.